Income Streams - Your Three Armies.

I like to use War as analogy in Finance.

We are in a constant state siege in Singapore. We have to battle foreign talent and meet tough expectations from management at work. Recently our public transport has almost become a war zone.

Sometimes, you can look at your income stream as your armies.

These armies move, fight and die like real soldiers. An income stream can be eaten up with the introduction of a big liability. Each income stream has its own powers and limitations, the same way some armies fight better on land, sea or air.

Here is a breakdown of the three armies I know :

a) Earned income

Like many of you folks, this is my largest army. Your earned income power peaks in your 30s and starts to wane in your 40s. But the good news is that earned income does not swing with the markets and provides a certain measure of security throughout the years.

However, know that this army will age as you hit your forties. As many mid-career professionals will attest, the job market is brutal to any man in his forties and by this time, he would be encumbered with multiple mortgages.

Wean yourself out of using this army for battle before you hit your fortieth birthday.

b) Portfolio Income

The power of my second army is a about 60% of my largest army. Your portfolio income starts small and can become stronger the more you save. Having skills in investing make this army even more powerful.

The problem with this army is that it is very unpredictable. Sometimes, this army fights well and many enemies can destroyed in the process. In bad times this army actually turns against you. This upcoming recession is likely to be very bad. No one has any idea how Europe will dig itself out of this mess.

This army is also likely to survive your passing and can be given to your children. It grows with time and can become unstoppable when you hit your 50s.

c) Royalty Income

My last army is very weak and gives me only $150 a month. This army is perpetual and is normally not likely to be subject to market cycles. The problem is that accumulating it is very challenging.

This last army can only be cultivated if you manage your time after office hours well and have to account for the large amounts of channel saturation. Almost anyone can write and float an e-book in Kindle.

A large amount of time is now spent cultivating my third army for battle. My personal wish is that this army eventually becomes my most powerful army upon retirement. This will require a book to hit the best-seller list internationally if it were to happen.

d) Combined Arms is possible

The armies fight together to achieve all your life ambitions. My first army is used to reinforce my second army in the forms of REIT purchases. I look forward to starting on commercial property in 2016. Proceeds from the second army fund my third army, eventually, I have to start a marketing budget once I get serious about the online publication of e-books which should have a website and twitter feed.